HCLTech Q1 Preview: Growth Headlines, But Weakness Lurks in Fine Print

HCL Technologies Ltd will declare its June quarter financial results today after market hours. The board of the Noida-based company will also consider a second interim dividend for the financial year.

HCLTech is India's third largest software exporter. Its senior management will conduct the conference call at 7:30 pm today to discuss the earnings.

Market analysts expect the IT major to report double-digit year-on-year growth in net sales and net profit for the June quarter. Experts project a marginal rise in margins. Analysts reported that the company is likely to maintain its FY27 guidance.

Revenue and Profit Estimates

Yes Securities projects Q1 revenue at ₹34,050 crore, marking a 12.2% YoY and 0.2% quarter-on-quarter increase. In constant currency terms, revenue growth is estimated at 2.5% YoY and minus 0.6% QoQ.

The brokerage estimates EBITDA at ₹7,150 crore, up 18.5% YoY and 6.5% QoQ, with margins expected at 21%.

Nuvama Institutional Equities expects Q1 net profit to rise 19.8% YoY to ₹4,604 crore. This is based on a 13.4% YoY increase in sales to ₹34,401 crore. It also reported that EBIT margins will likely stand at 16.9%, up 60 basis points YoY.

Guidance and Margin Outlook

Nuvama and Kotak Institutional Equities expect HCL Tech to maintain its FY27 guidance. This includes a 1.5-4.5% constant currency revenue growth in the Services business and operating margins of 17.5-18.5%.

Kotak stated the hurdle rate to achieve the guidance range stands at 0.7-2.7% from the second to fourth quarters of FY27.

Motilal Oswal expects a consolidated revenue decline of 1.4% QoQ in constant currency. The brokerage reported that services could contract 1.5% QoQ due to client-specific headwinds in the telecom and manufacturing sectors. The software business is also expected to remain seasonally weak.

The brokerage also expects EBIT margins to improve by 40 basis points QoQ to 16.9%. This improvement is attributed to Project Ascent-led efficiencies and favourable currency movements. It expects BFSI and Hi-tech to remain relatively resilient, while Telecom and Manufacturing may continue to face weakness. However, the brokerage expects HCL Tech to trim the upper end of its FY27 revenue guidance by 100 basis points.

Key Investor Focus Areas

Kotak reported that investor focus will remain on the revenue mix and growth from AI-amplified and AI-native services. Investors will track the extent of deflation in AI-disrupted services.

Markets will also monitor pricing pressure in the core business, margin impacts and growth accelerators.

Commentary on profitability and execution discipline in cost takeout and vendor consolidation deals will be closely watched. Investors want to assess the firm's ability to generate new AI-led revenue streams to offset deflation.

HCL Tech maintains a higher exposure to relatively less AI-impacted infrastructure services. This background places added emphasis on management commentary regarding future AI integration.